The catch22 of mobile money moving – and the solution (Part 3 on mobile payment)
Number26 is a good example of new thinking in the mobile enabled digital banking arena. We have shown, that yet another mobile payment solution will be exactly that: just another attempt that fails, especially in the European market.
In a parallel universe, the banking world, it is uncommon to see real innovation, but alas, from time to time there is an attempt. And with that approach, it could be the platform for a shift into digitalization.
Number26 follows a “mobile first” approach (which is to be appreciated), and has some simple and unique selling points: Above all, it is free. There is no hassle opening the account, for a traveller abroad, additional charges typically added by all banks and credit card issuers do not apply and the immediate transparency of each transaction to be displayed as a push message on the smartphone is a Gen Y bonus.
There is a free mastercard included in the deal and the “know your customer” thing is done via -gosh!- IM video conference. Welcome to the 21st century.
Contrary to the article in Techcrunch, that states:
“As a reminder, commercial banks in Europe suck. In the U.S., you can show up and open an account in five minutes. They will scan your ID, make you sign a couple of documents, and you will leave with a temporary debit card. In Europe, you need to make an appointment with a bank’s local branch, bring documents, fill a lot of forms and listen to a customer representative trying to upsell you. You will waste a couple of hours.”
the situation in the US is even worse (try to open a bank account in the US without traveling there as a resident of Europe, and you will know what hassle and cost you have to look into!), and may I mention the usual “mailing a cheque” as being a bit 19th century? The Fed is still sifting through billions of hand-written cheques every month (18.3 billion in 2012). With SEPA, all over Europe this is a thing of the past. Money is wired between individuals and businesses alike without cost, and the crediting happens snappy. Nearly all transactions account to account are direct, without an intermediary other than the two banks involved. Most states in the US have a strict “KYC” policy, due to the legal requirements.
So, Number26 is a refreshing approach. There are unique selling points in their offer and the transparency will probably be appreciated – mostly as a second account to try it out at first. But many people have several mobile phones and several different phone numbers, too – so why not have several bank accounts serving different purposes?
Adoption rates will take up for mobile banking (or mobile payments for that matter) if there is additional value in using them. The critical factor in mobile payments is the adoption rate. Conventional payment methods (CC, wire, …) are taken by nearly every business. Establishing a new payment method requires the infrastructure to be ubiquitous, which leads to a catch22, similar to the adoption hurdle of electrical vehicles, that also require a dedicated infrastructure).
There is only one way out: The market pull needs to be greater than the cost-resistance in businesses, forcing the shop-owners and vendors to adopt the infrastructure (bei it NFC or others) as being less costly than losing the clients that insist on using a certain payment method.
As long as providers don’t come up with a convincing innovation in the area, people will simply stay put where they are.